Decision Day Arrives at Former Record HighsJapan 225 CFDFOREXCOM:JP225FOREXcomDecision day has arrived for Nikkei 225 bulls. The bullish breakout we were looking for played out nicely earlier this week, resulting in a violent move above the former record highs. However, in the period since, price action has turned decidedly cautious, likely reflecting the prevailing geopolitical backdrop involving Iran and the United States, along with just how far the index has already run. Month end may also be a factor. So, the bulls have a choice: defend the former highs or step back and let Thursday’s reversal extend further. If the bulls do step in, longs could be established above the former record high at 58,586 with a stop beneath the level for protection, targeting a retest of the highs set on Wednesday. If the bulls step back, the door opens for the setup to flip, with shorts established beneath 58,586 with a stop above, targeting either 57,700, 56,500 or the 2026 uptrend. The message from the oscillators favours a bullish bias, although both RSI (14) and MACD look a little toppy, providing a cautionary signal to bulls that the strength behind the move may be starting to ebb. I’d be more inclined to take my cues from price action in the current environment rather than hold a fixed directional bias. Given the index has demonstrated a relatively tight relationship with moves in USD/JPY this week, with the correlation coefficient sitting at 0.91, keep an eye on Tokyo inflation data released at 8.30am local time on Friday. It’s likely to be soft given weakness in energy prices, disinflation in food items and some government subsidies, but markets expect that. An undershoot in the key core and core-core measures would likely soften the yen, potentially assisting the case for Nikkei longs relative to shorts. The opposite is true should the data overshoot The core ex-fresh food measure is seen printing at 1.7% relative to a year earlier, down from 2% in January.